Instalment payment on credit cards: how to avoid the interest trap

What does instalment payment (revolving) mean?

With instalment payment you don't settle your monthly credit card bill in full, but only a set share — often 3 % of the balance, or at least a small fixed amount. The unpaid remainder is carried over to the next month and charged interest.

This seems convenient because the monthly burden stays low. But that's exactly where the danger lies: the outstanding sum keeps growing and interest runs continuously.

Why the interest is so high

The effective annual interest on instalment payment in Germany averages around 17 % and ranges from about 13 to 25 % depending on the provider. That's far more expensive than a classic instalment loan.

Since interest is calculated monthly on the outstanding balance, an initially small debt can add up considerably over the year — a classic debt spiral.

Note: instalment payment is often preset

Many free credit cards have instalment payment enabled by default. If you're not careful, you automatically pay interest even though you could actually settle the bill in full. That's why you should check the setting right after receiving the card.

How to switch to full payment

A few steps let you avoid the interest trap entirely:

• Switch the payment method to full payment in online banking or the app
• Alternatively request it by phone or message from the provider
• Set up a direct debit mandate for the full bill amount
• Use the interest-free payment period (often up to 30–51 days) as a liquidity advantage